San Francisco's cutting-edge universal health care program continues to be roundly applauded for its goal of ensuring all city residents have medical care - but the way employers are paying for it, or sometimes not paying for it, remains a major controversy at City Hall.

At Supervisor David Campos' urging, the Board of Supervisors is expected to hold a hearing this month or next on businesses, primarily restaurants, that levy a surcharge on customers' bills to pay for Healthy San Francisco, but pocket some of the money themselves. Campos has asked that the district attorney investigate the surcharges on the grounds they may amount to consumer fraud.

Campos is also concerned about businesses of all kinds that create health reimbursement accounts as a way to comply with the city mandate but are tight-fisted in actually spending the money on their employees' health care.

"We in San Francisco have been proud to be the first city to have universal health care," Campos said. "But it's hurting the vast majority of businesses that are actually playing by the rules and following the letter and spirit of the law if they have to compete with businesses that are not doing that."

But Rob Black, executive director of the Golden Gate Restaurant Association, said Campos, who is up for re-election in November, is relying on old or faulty data to make his case.

Black believes changes to the employer mandate approved by the board and mayor late last year are working - and that Campos is basing his concern on data produced before the changes were made.

"He's either misrepresenting it or he has no clue what he's talking about," Black said.

At issue is Healthy San Francisco, the first program of its kind in the country, which debuted five years ago. Any uninsured adult living in the city who doesn't qualify for coverage under Medicare or Medi-Cal can participate - regardless of their immigration status, pre-existing medical conditions or whether they're employed. Currently, 47,285 participants are treated at 37 locations.

The overarching idea was always popular in liberal San Francisco, but the restaurant association sued the city over the mandate that employers provide health care, either through private benefits, paying into Healthy San Francisco or creating their own health reimbursement accounts. The city prevailed in court.

Addressing a loophole

In November, Mayor Ed Lee signed legislation intended to close a loophole in the way employers could set up the reimbursement accounts. Previously, employers could take back any unused money at the end of every year. In 2010, 860 employers put a total of $62.5 million into the accounts and re-pocketed all but $12.4 million.

Under the changes, employees can accrue up to two years of unused funds and have 90 days to use them after they leave the company. Employers must also post information about the accounts at the workplace. And any business that levies a surcharge on patrons' bills stating it is for Healthy San Francisco must use the money for health care.

Campos has always said the changes didn't go far enough and wants to place the issue at the forefront of City Hall business again this fall.

He pointed to a new report from the city's Office of Labor Standards Enforcement that summarized data from 2011 provided by 3,652 businesses and nonprofits in the city that are required to provide health coverage for their employees under the city law.

The report found that half of the employers that set up reimbursement accounts spent less than 10 percent of that money on health care. More than half said their accounts didn't cover at least one common health care cost such as dependent care, dental care and vision expenses.

In addition, 101 of the 172 employers who levied surcharges on customers' bills to pay for employee health care said they didn't spend all that money on health care. That wasn't a violation of the law in 2011, but it is this year.

"My belief is the legislation we passed doesn't close these loopholes," Campos said. "That is not how we want to do business in San Francisco."

Using faulty data

Black said Campos shouldn't be relying on data from 2011, before the changes to the law went into effect. He said he expects next year's report to be much different - and that he is hearing anecdotally that businesses are already doing a better job of getting health care money to their employees.

Business groups including the restaurant association created a public awareness campaign about the law's requirements earlier this year.

"We're certainly from the business-community side doing our best to reach out to individual businesses to make sure they're in compliance with the law," Black said.

Campos is also using a civil grand jury report released in July to bolster his assertion that the employer mandate is not working. The report surveyed 38 businesses and found that "a small but growing segment of employers, primarily in the restaurant industry, are profiting from the practice of adding a surcharge to the bill of every customer."

The grand jury recommended that the surcharges be outlawed and that employers be required to provide private health benefits or pay into the city's fund, but not be allowed to set up the reimbursement accounts.

Black said the report was "fundamentally flawed" on a number of counts, including the fact that the grand jury is authorized to investigate government operations, not private businesses.

"United Airlines has a bag surcharge. Ticketmaster has a ticket surcharge," Black said. "How do you ban surcharges?"